REFILE-Mexico's Senate committees to start debate on revamped energy reform

Sun Dec 8, 2013 9:58am EST

By Alexandra Alper and David Alire Garcia
    MEXICO CITY, Dec 8 (Reuters) - Mexico's Senate committees
begin debate on Sunday on an energy bill that would open up the
world's 10th-biggest oil producer to private investment by
allowing new types of contracts, marking the industry's most
dramatic overhaul in 75 years.
    The bill, announced by centrist ruling party and opposition
conservative lawmakers on Saturday, would let private firms
partner with ailing state oil firm Pemex via
profit-sharing, risk-sharing and service contracts as well as
licenses in a bid to boost sagging production. 
    The reform, which would keep ownership of crude in state
hands, is at the center of an economic reform drive that
President Enrique Pena Nieto hopes will boost long-lagging
growth in Latin America's No. 2 economy.
    It is much bolder than a draft proposed by Pena Nieto's
Institutional Revolutionary Party (PRI) in August, which would
have offered profit-sharing contracts and was considered too
tame for attracting private firms.
 
    Saturday's proposal would allow private investors to drill
for and market the country's oil. 
    "I feel very optimistic about this," said Luis Miguel
Labardini, a partner at Mexico City-based energy consultancy
Marcos y Asociados, who said that the production-sharing
contracts are "very important" for Mexico's vast deepwater oil
reserves.  
    "It seems that the original PRI initiative from Pena Nieto
wasn't written in stone, and that Pena Nieto was able to take
into consideration the reaction of the industry." 
    The reform, however, stops short of full-blown concessions
that oil majors had been hoping for and does not allow companies
to book reserves. It does let them report projected income from
agreed contracts for accounting purposes.
    "Bottom line is that if implemented this should boost
(foreign direct investment) and oil output over the (medium
term)," David Rees, an economist with Capital Economics, said in
an email.  
    The draft marks a major break with tradition in Mexico,
where assets of foreign oil companies were expropriated in 1938
to create Pemex, which is a symbol of national pride. 
    Once congressional committees have signed off on the bill,
it then passes to the upper and lower chambers separately for
approval. Pena Nieto hopes to pass the reform before Christmas
but lacks a majority in Congress. 
    He needs the support of conservatives to push the bill
through after the country's main leftist party, which opposes
opening the oil sector, pulled out of talks.
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